00:00I do want to note the stock, yes, was down 28% yesterday, but it is coming back a little
00:04bit
00:04here today. It's up now about 6%. It seems like Wall Street got sort of tripped up by the feeling
00:11that new customer additions is going to be muted next year. Is that fair to say?
00:19So, Alexis, first of all, thank you for having me. If you look at the numbers we delivered,
00:23there's a very good quarter, revenue up 25%, ARR up 25%, we crossed $3.5 billion ARR market.
00:34Our operating margin is record high, 23%. Yes. So, I think that the market thinking that our new logo
00:43acquisition is slowing down was misunderstood. Our CFO made a comment that basically implied that we
00:51want to accelerate the growth of new logo. We have already accelerated the growth of upsell.
00:57So, the comment was taken in wrong context. We are adding new logos. We are adding upsell.
01:03Our customers are doing very well. Our track record is very good.
01:09So, what kind of average revenue growth do you expect? The ARR seemed to be one of the concerns
01:18of the street. I thought 16% to 17% sounded pretty strong, but you've got 25% now. Is
01:25the forecast
01:26a little bit weaker than what we're currently seeing?
01:29So, as a CEO, I have always big aspirations. But when it comes to giving guidance, we want to be
01:38disciplined. We want to be prudent. But if you look at the track record of Zscaler, we always met or
01:45what exceeded the expectations and the guidance. So, we are very bullish because the market opportunity
01:51is big. Cyber has never been in a stronger position from needing solutions point of view.
01:58In fact, mythos has further added fuel to the fire. I feel like this is another COVID moment
02:04in the world of cyber because mythos, like models, are finding security vulnerabilities at a record
02:11speed. The solution is not just keep on patching them. The solution is zero-trust architecture that
02:18Zscaler pioneered to phase out the legacy firewalls and VPN technology. So, when customers are talking
02:25to us, they're asking for more and more zero-trust solutions. So, we're pretty bullish about the
02:31future of the company.
02:32But shouldn't you be, I mean, especially with the tailwind of AI, with the kind of accelerating
02:37growth that we're seeing now, I would expect your average recurring revenue expectations
02:42for 2027 to be far higher than one quarter in 2026?
02:49So, this guidance was given as preliminary guidance for the fiscal year that starts on August 1.
02:58This is early stage. To some degree, we kept in mind that we had a couple of sales leadership
03:04changes that impacted the guidance we gave. But as we pass through and get ready for fiscal
03:1127, we'll be giving more refined guidance to our market.
03:17Jay, are there any plans to dive deeper into identity security for AI agents in your suite of,
03:26in your portfolio suite right now? Because it's something that our analysts at Bloomberg Intelligence
03:31sort of called out as perhaps limiting larger order closings for you.
03:37Actually, identity plays an important role. It's a starting point. If you think about the rollout
03:43of AI agents, what's holding enterprises back is the assurance that these agents will only be able
03:52to do things that they're allowed to do. We see so many situations where agents are going rogue.
03:58Today, a user is the weakest link. Tomorrow, from cyber point of view, an agent will be the weakest link.
04:04And these are more dangerous because they act in milliseconds. They take no break, no weekends,
04:11no sleep. And what you really need to enforce policy is a zero-trust exchange, a policy engine that says,
04:19agent A can talk to agent B. Agent A can talk to certain applications. We are the exchange by default.
04:27We have done it for users. We've done it for workloads. So we are best positioned. I do not think
04:32identity is the factor that's holding us back. Our view is that we should not be building identity for
04:39agents. I want to take identity from companies who help you build agents. Microsoft is a great partner
04:46for us. Google, AWS. All these parties help you build agents. We take identity from them as being
04:53the Switzerland, and we connect right party to right party. Every enterprise is waiting for a solution
04:59like this. We'll be launching it next month at our annual user conference. So you don't have or plan to
05:07develop an identity security solution for AI agents? I do not need to build identity solution myself.
05:14You need to work with partners with the right partners for us. And that's how we have done in the
05:20past. Take,
05:21for example, zero-trust our users. We actually aren't the dominant player in this space. We work with
05:28Microsoft, Okta, and others to take identity, validate the policy, and connect right things to
05:34right things. We think our strategy is the right strategy. You don't try to build everything. You build
05:39things that are core to you, and then you integrate with other partners using APIs.
05:45So if the fundamentals of the company, as you say, Jay, are solid, what is,
05:51why is there, there appears to be a disconnect with traders? Why do you think that is?
05:57I think they aren't fully understanding it. If you think about the need for cyber,
06:03with Mito's, without Mito's, AI security coming in. And that's what we have been delivering. If you
06:09look at our numbers, very good numbers all along. And our goal is to make sure we keep on innovating
06:16our solutions, taking care of our customers. Over 45 percent of Fortune 500 companies, they depend
06:22upon us. Lots of government agencies are working with us. So we'll keep on building and delivering,
06:29and I think the market will catch up. I want to ask about the effect of
06:33the stock price. How is it operating in a year where the stock has dropped from, you know,
06:41last year, if you hired someone new, they're used to the stock in the 300s. And this year,
06:45it's more around 150. So it's basically halved. How does that affect the way you operate?
06:53Look, stock will go up and down. Sure, it impacts some employees and how much equity they have.
07:02But overall, we have seen that for any large companies, stocks have gone up and down from
07:08time to time. If you build great solutions, if you solve customers' problems, the market comes back
07:14over time. We have seen that before. I believe we'll be fine. Who are you partnering with in terms
07:22of identity AI agents? Because you said that while you're not building it out yourself, you're looking
07:27to partners to do that. Who are those partners for you? So every provider, every software provider who
07:34allows you to build agents builds identity along with that. We started working with Microsoft and became
07:41part of the EntraID program, which is being built for agents. Number one provider. Other providers,
07:48folks like Snowflake, Google, AWS, they're all building agents and they provide identity. Combination of
07:56the two allows us to enforce policy. That is the best strategy. Imagine trying to compete with all these
08:04hyperscalers to say that I want to build identity. Partnering for identity is the best thing. And that's
08:11what we do. And we have a number of those relationships in place.
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